Perth

PERTH - WILL THE IRON ORE PRICE DROP END THE BOOM?

While most capital cities in Australia are heavily influenced by interest rate changes, this is not the case in Perth where iron ore prices play a much greater role. The rapid drop in the iron ore price therefore has been cause for concern, driven by a potential collapse of a major Chinese developer, as well as better production conditions in Brazil.

At this stage it’s uncertain how much iron pricing will rally back however it does look like the days of more than $US240 per tonne being achieved in May are likely over. What does this mean for property? It’s likely to slow both prices and rents down, which could be a welcome change for buyers and renters looking to get into the Perth market.

Even though the iron ore price drop was only recent, house prices have softened in Perth over the past two months. Nevertheless, some parts of the city have seen particularly large increases and are on average now at their peak. The top performer has been the expensive inner suburbs which have increased by just over $290,000. By suburb, beachside Cottesloe has seen an increase of over $540,000.

What’s the outlook for Perth over the rest of the year? It’s unlikely that demand for iron ore will stop completely given how significant infrastructure spending is in China at the moment. Nevertheless, the drop is likely to have some impact on buyer confidence over the coming month.